Outflows from mutual funds in September stood at a whopping Rs 2.30 lakh crore with investors moving money out of liquid or money market funds.
While fund managers were quick to attribute the withdrawals to the advance tax payments, September 2017 saw inflows into liquid funds of Rs 4,833 crore. More recently, in June liquid funds saw inflows of Rs 52,104 crore.
The average monthly inflows into equity schemes in H1FY19 fell to Rs 10,080 crore from Rs 14,200 crore in 2017-18. Equity funds (which includes equity, ELSS and arbitrage funds) saw inflows of Rs 11,251 crore in September; this is higher than the Rs 5,923 crore in August which was a 18-month low. The industry’s assets under management (AUM) were Rs 22.04 lakh crore, a fall of 12.5% over the Rs 25.20 lakh crore in August.
A liquidity scare in the money markets in the wake of collapse at IL&FS and the inability of a couple of mutual funds to sell Non-Banking Financial Services paper has made investors nervous. While companies due withdraw money from mutual fund in September to pay advance taxes the relatively tight liquidity in the money markets has hurt investor sentiment. The sharp fall in the prices of stocks – and the fact that 75% of stocks have been in the red since January – hasn’t helped either.
Data from Association of Mutual Funds in India (Amfi) shows debt funds (liquid, income and gilt funds) saw outflows of Rs 2.44 lakh crore, while liquid or money market funds saw outflows of Rs 2.11 lakh crore. In December last year, debt funds had seen redemptions of Rs 1.99 lakh crore. Liquid funds invest in debt and money market securities with maturity of up to 91 days only.
Fund managers point out that, typically, banks and corporates redeem units at the end of every quarter. However, the liquidity crunch seen in the last 10-12 days of September was a big trigger for the withdrawal from liquid funds. Even banks have redeemed investments in liquid funds last month.
Apart from liquid funds, income and gilt funds also saw outflows of Rs 32,504 crore and Rs 968 crore, respectively. Sundeep Sikka, ED & CEO, Reliance Nippon Life Asset Management, said the outflows were not unusual and took place every quarter-end given that advance taxes GST needs to be paid.
NS Venkatesh, CEO, AMFI, said, “Despite the market volatility and the credit event which occurred, the flows in the equity segment of the market from the retail investors have been positive.
There has been a robust growth in the number of folios at 26% annual growth rate, which now stand at over 7.75 crores. Systematic investment plans (SIPs) continue to show an increasing trend with Rs 7,727 crore of funds mobilised in the month of September 2018.”